Indonesia Laments ‘Over-Dominance’ of U.S. Dollar: IMF Update

(Bloomberg) -- Mounting trade tensions and stresses in emerging markets are starting to take a toll on the world economy. The International Monetary Fund this week cut its outlook for global growth for the first time since 2016, predicting 3.7 percent expansion this year and next compared with a forecast of 3.9 percent three months ago. Those issues are dominating talks at the annual IMF and World Bank meetings in Bali, Indonesia on Thursday, as well as a stock-market rout that’s spread from the U.S. to Asia.

Here are the latest developments from the meetings, updated throughout the day. (Time-stamps are local time in Bali.)

Indonesia Sees Need for Alternatives to Dollar (1:21 p.m.)

Thomas Lembong, chairman of the Indonesia Investment Coordinating Board, opened up the Bloomberg Modern Markets conference with a broadside against the dollar. He notes tectonic shifts against the greenback, citing comments from Russian President Vladimir Putin and others, about the need for alternatives to the dollar and the need for an alternative trading system.

He said the dollar causes complications for emerging economies, though it’s not going away anytime soon. Indonesia has been swept up in the market turmoil triggered by rising U.S. interest rates and a stronger dollar, which has pushed the rupiah down 11 percent this year.

“The challenge today is not its dominance but it’s over dominance.”

Earlier in the day, Lembong said the U.S. stock-market sell-off was good for emerging economies as it means the U.S. will be less of a draw for capital and it lessens the need for the Federal Reserve to raise interest rates.

Read More on the Bali Meetings:

Lagarde Says Yuan Weakness Due to Dollar (10:28 a.m.)

IMF Managing Director Christine Lagarde pointed to the dollar’s strength as the main culprit for the weaker Chinese currency.

“If you compare the position of the renminbi relative to the dollar, it’s one particular story which has also a lot to do with the strength of the dollar,” Lagarde told reporters. “If you compare this same currency, the renminbi, with a basket of currency, there is a bit of depreciation, but certainly not as much.”

Lagarde said a currency war would not be welcome news, but she also suggested China has been moving in the right direction.

“We are seeing more and more -- China included -- countries that actually let their currency fluctuate, and that certainly has been the case over the last three years as far as China is concerned,” she said. “We do have instruments to actually measure the external-sector situation, and we hope that the recommendations that we have given to China, in terms of letting the currency fluctuate, will continue to be approved and agreed and implemented by China.”

Kim Says EMs to Lose Out in Trade War (10:09 a.m.)

World Bank President Jim Yong Kim said he’s concerned about developing economies losing out from deepening trade tensions, which are being escalated by the U.S.-China tariff conflict.

Trade is among the biggest downside risks to the global economy, Kim told reporters on Thursday in Bali, Indonesia -- an emerging economy that he cited as one under threat by a trade dispute.

“We’d see a clear slowdown in the economy and the impact on developing countries would be great,” said Kim. “We’re working with every single one of our countries to prepare them in case it gets worse.”

Developing nations make up about 48 percent of world trade, up from 33 percent in 2000, while the number of people living in extreme poverty has been reduced by half since 1990 to now just about 1 billion, according to the World Bank. Trade has helped boost the quality of jobs in poorer nations, generated stronger economic growth and driven productivity increases, according to a 2015 report the bank released with the WTO called “The Role of Trade In Ending Poverty.”

“Trade is critical, because that is what has lifted so many people out of extreme poverty,” said Kim.

Thursday Highlights

  • 1pm: Bali Fintech Agenda with Lagarde, Bank of England’s Mark Carney, Indonesia Finance Minister Sri Mulyani Indrawati, South African central bank Governor Lesetja Kganyago, and World Bank president Kim
  • 3pm: Human Capital Summit 2018, with Singapore’s Prime Minister Lee Hsien Loong, Melinda Gates and others
  • 4:30pm: IMF press conference on the Regional Economic Outlook for Sub-Saharan Africa
  • 5:30pm: Press briefing for the Group of 24

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